Engaging Corporate Donors in the OBBBA Era

The dust is settling on the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. Nonprofits are beginning to wrap their arms around the new law’s significant shift in the tax treatment of corporate charitable donations.

Beginning in 2026, a new 1% floor will apply, meaning corporations must donate more than 1% of taxable income before any charitable contributions become deductible. This limitation is in addition to the current 10% “ceiling.” Navigating these two laws, along with the five-year carryforward rules for unused deductions, will present challenges for both charities and the companies that support them.

In light of these changes, here are three suggestions as to steps you can take:

First, get a jump on the issue this year before the new law kicks in. Reach out proactively to your corporate donors and offer to meet with their finance teams to help structure donations in 2025 to maximize tax benefits.

Second, get up to speed on how a “bunching” strategy—deliberately combining multiple years of giving into one larger gift year to surpass the 1% floor—might work in 2026 and beyond. With careful planning and coordination with corporate donors, you can take steps to blunt the effect of feast or famine donation cycles that could make it hard for your organization to budget and plan its programs.

Third, keep in mind that companies may still be able to deduct charity sponsorships as marketing expenses if the payment provides a direct business benefit, such as advertising, rather than being considered a pure charitable donation. Under IRS rules, a business will need to substantiate the benefit received. Note also that your organization will need to properly account for this support on your end of the transaction, including determining whether to report it as “unrelated taxable income.”

As is the case with any tax rules—and especially new rules that are not yet well understood—the issues are complex with lots of legal twists and turns! Reach out to your legal and tax advisors to get up to speed on how the new rules might impact your own specific situation and consider the East Tennessee Foundation team as a resource in those discussions. We are here to help!

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.